1. Which event indicates that deflation is occuring?
a. a savings account can suddenly buy much more than before
b. the profits of a clothing factory increase rapidly
c. the length of time it takes to pay off a home loan decreases by five years.
d. a local store begins offering ice cream bars at two for $5.00 instead of three for $5.00
a. a savings account can suddenly buy much more than before
How does money differ from barter?
a. Money is mostly important as a way to get goods and services
b.money is used to exchange goods and services
c. Money has value only because people agree it has value
d. money has been used for lthousands of years
c. Money has value only because people agree it has value.
Bryan needs a new backpack. He compares theprices of three different backpacks at a local store. What function of money is Bryan demonstrating?
a.unit of account
b.store of value
c.acceptance of payment
d.medium of exchange.
a. unit of account
The correct answer is a. a savings account can suddenly buy much more than before.
To understand why this is the indicative event of deflation, let's first discuss what deflation means. Deflation refers to a decrease in the overall price level of goods and services in an economy over a sustained period. In other words, it is a situation where prices are falling.
Inflation and deflation are opposite economic phenomena. Inflation occurs when there is a sustained increase in the general price level, while deflation occurs when there is a sustained decrease in the general price level.
Now, let's examine the options:
a. A savings account can suddenly buy much more than before: This scenario suggests that the prices of goods and services have decreased. As a result, the purchasing power of money has increased, allowing you to buy more with the same amount of money. This is consistent with deflation.
b. The profits of a clothing factory increase rapidly: The increase in profits of a clothing factory does not necessarily indicate deflation. It could be a result of increased demand, cost-cutting measures, or other factors unrelated to overall price levels.
c. The length of time it takes to pay off a home loan decreases by five years: This event suggests a decrease in interest rates or a change in the loan terms. It is not directly related to deflation as it does not necessarily imply a general decrease in prices.
d. A local store begins offering ice cream bars at two for $5.00 instead of three for $5.00: This event suggests a change in pricing strategy by the local store, but it does not provide information about the overall price level. Therefore, it is not indicative of deflation.
To determine which event indicates deflation, we need to focus on option a. When prices decrease, you can purchase more goods and services with the same amount of money, which is a characteristic of deflation.